New Delhi: India’s aviation regulator Directorate General of Civil Aviation (DGCA) has banned national airlines trading seat-miles with so-called regional carriers to meet regulatory requirements, mandating that all airlines fly unprofitable routes to poorly connected cities and towns as part of their operating licences.

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/Content/Videos/2009-04-24/2304_QT_MINT_TV.flv0de4082a-302b-11de-b125-000b5dabf613.flvNot complying with the requirement can potentially lead to an airline’s operating licence being scrapped.

This requirement, contained in what are called route dispersal guidelines, divide domestic routes into three categories. Category I represents the profitable routes, including major cities such as Mumbai, New Delhi, Bangalore, Hyderabad, Kolkata and Chennai. Category II includes the north-eastern region, Jammu and Kashmir and Lakshadweep, while category III represents places such as Coimbatore, Kochi and Pune. Airlines have to deploy on category II routes at least 10% of their flight capacity deployed on the most profitable routes, and at least half on category III routes.

Most national airlines prefer flying the metro routes, which offer better passenger traffic and yields. But regional airlines operate on licences that allow them to use as their hub a metropolitan city—defined as New Delhi, Mumbai, Kolkata and Chennai—and connect to smaller cities and towns. They cannot fly between two metros.

So far, domestic airlines could opt to buy an equal number of seats from regional or other carriers that have operations on unprofitable routes to comply with existing norms. The airlines selling seat-miles would have in excess of the minimum required in the route dispersal guidelines. For instance, Wadia Group’s GoAirlines (India) Pvt. Ltd, which runs low-fare carrierGoAir, bought seats from Gurgaon-based MDLR Airlines Pvt. Ltd last year when it was unable to meet the route dispersal requirements.

“What was happening was they were purchasing (seats) from airlines like MDLR which anyway fly regional routes. This was affecting connectivity," said a senior government official, who asked not to be named. The official added that domestic airline firms such as Kingfisher Airlines Ltd and Jet Airways (India) Ltd, however, can trade among themselves to meet these requirements.

Right direction? An aviation expert said the step would make sure airlines include non-metro routes on their network. Ramesh Pathania / Mint

An aviation expert said the step would make sure airlines include non-metro routes on their network. “Stopping that is a right direction. It will bring in equality amongst players," said Kapil Kaul, India chief executive of the Centre for Asia Pacific Aviation, referring to the fact an airline complying with the rules by flying a category II or III route may be at a disadvantage compared with rivals who trade seat-miles rather than fly those routes.

Airline lobby Federation of Indian Airlines has been seeking a removal of route dispersal guidelines which would potentially free them from flying remote routes such as Agartala and Lakshwadeep, but civil aviation minister Praful Patel has said in the past there is unlikely to be any changes in that structure.

Airlines with national operating licences will likely see their costs increasing and losses increase if the latest directive is implemented though the extent of the losses were not immediately clear.

“Regional airlines and national airlines are meant for a different purpose. If national airlines start trading with them, then it defeats the purpose of having regional airlines," said Paramount Airways managing director M. Thiyagarajan.

The airline is launching services to the north-east this month-end connecting Agartala and Guwahati. Thiyagarajan, however, said that the government should relook at route dispersal guidelines framed intially to allow “equal economic growth" and assess if many of these routes have become already oversaturated.